Shipping Companies, Longshoremen Reach Tentative Pact; Avert Strike

Whatever else might be said of the International Longshoremen’s Association, this is one union that knows how to drive a hard bargain. On December 27, a federal mediator announced the ILA and the U.S. Maritime Alliance had reached a tentative contract agreement, thus heading off a potentially crippling strike at 14 Atlantic and Gulf Coast ports. The key obstacle to a settlement – whether or not to scrap cargo container royalties amounting to over $15,000 per worker a year – has been removed. Port owners had argued the practice is needless and costly; the union had insisted it is fair compensation for jobs lost to automation. “The royalty will stay intact,” ILA Executive Vice President Benny Holland asserted. “We have worked out a formula for it.” The remaining details are expected to be resolved by the January 28 deadline.

Union Corruption Update described at length this past September how the ILA, which represents around 65,000 employees at East Coast, Great Lakes, Gulf of Mexico and other cargo ports in the U.S. and Canada, is mired in inefficiency and cronyism. Union leadership has a lot to do with these problems, having negotiated them into a succession of contracts. Common union practices now include paying three dockworkers to operate a one-person crane and paying a dockworker up to 24 and even 27 hours for performing a standard eight-hour shift. As for corruption, the Waterfront Commission of New York Harbor has concluded following public hearings in late 2010 that the union had at least nine relatives of late Genovese crime family boss Vincent “the Chin” Gigante on its payroll. These and other workers, noted the commission, often hold “no show” jobs and are “overwhelmingly connected to organized crime figures or union leadership.”

The end result of such arrangements is that ILA workers receive levels of compensation that are unusually high even by union standards. The average Longshoremen annual wage and benefit package is now $124,138, with salary/wage comprising roughly $100,000 of that. The latter figure is roughly double what unionized full-time U.S. workers as a whole receive. At the Port of New York and New Jersey, nearly three dozen members at its various terminals make at least $368,000 a year in wages and benefits; one in three workers make at least $208,000. The waterfront commission found that shipping companies in some cases have had to pay salaries exceeding $400,000 for jobs that “require little or no work.”

Inflated as they are, these sums don’t include what are known as “container royalties.” These are lump sum payments from shipping firms to union members on the basis of cargo weight. Some people might call them forced bonuses. The union insists they are necessary compensation for job losses resulting from the introduction of automated cargo weighing. Yet this “temporary” measure, instituted more than 50 years ago, still remains intact. And in 2011, it provided ILA members with a combined extra $232 million. That worked out to about $15,500 per worker. James Capo, CEO of the industry side of the negotiations, the U.S. Maritime Alliance (USMX), argues the practice is a wasteful, outdated relic that pads operating costs and ultimately the price of finished goods. But ILA President Harold Daggett during negotiations made clear that keeping the system was non-negotiable. Additionally, he threatened to block any loaded truck from leaving a port if a given container exceeded its highway weight limit. “If they (management) want to play games, we’ll play games,” said Daggett.

For the union, the main game was hardball. And that a willingness to conduct a 14-port strike involving 14,500 workers if their contract demands weren’t met by the September 30 expiration date of the existing contract. Since retailers and suppliers typically need months of lead time to plan inventories, a walkout likely would have had a devastating impact on retailers during the Christmas shopping season. Under government pressure, the ILA and USMX agreed to resume negotiations under the auspices of the Federal Mediation and Conciliation Service (FMCS) for another 90 days, thus delaying a strike until after December 29. A strike would have been the first at any East Coast or Gulf Coast port since 1977. While President Obama had the authority to invoke the Taft-Hartley Act of 1947 to issue an 80-day emergency injunction against a strike, organized labor, and not just the ILA, would have had a hard time forgiving him or the Democratic Party. This political limitation made a resolution that much more imperative. Negotiations were held under tight wraps to avert a breakdown. Even the location was secret.

Finally, after some three months of negotiations, during the evening hours of Thursday, December 27, the FMCS announced a breakthrough: The ILA and the U.S. Maritime Alliance had reached an agreement over the container cargo royalty issue. The full statement by FMCS Director George Cohen read as follows:

I am extremely pleased to announce that the parties have reached the agreements set forth below as a result of a mediation session conducted by myself and my colleague Scot Beckenbaugh, Deputy Director for Mediation Services, on Thursday, December 27, 2012.

The container royalty payment issue has been agreed upon in principle by the parties, subject to achieving an overall collective bargaining agreement. The parties have further agreed to an additional extension of 30 days (i.e., until midnight, January 28, 2013) during which time the parties shall negotiate all remaining outstanding Master Agreement issues, including those relating to New York and New Jersey. The negotiation schedule shall be set by the FMCS after consultation with the parties.

Given that negotiations will be continuing and consistent with the Agency’s commitment of confidentiality to the parties. FMCS shall not disclose the substance of the container royalty payment agreement. What I can report is that the agreement on this important subject represents a major positive step toward achieving an overall collective bargaining agreement. While some significant issues remain in contention, I am cautiously optimistic that they can be resolved in the upcoming 30-day extension period.

On behalf of our Agency, I want to thank the parties, especially ILA President Harold Daggett and USMX Chairman & CEO James Capo, for their ongoing adherence to the collective bargaining process, which has enabled them to avoid the imminent deadline for a work stoppage that could have economically disruptive nationwide implications.

There are other issues to be worked out. They include retention of the guaranteed eight-hour workday in the current contract and the system of seven-man “lashing gangs” (i.e., work crews whose job it is to secure cargo containers to a sea-bound ship using metal lashing rods). Experience has shown more than once that the term “cautiously optimistic” is a euphemism for “We’ve got a ways to go yet.” Still, with the container royalty issue off the table, the ILA and the industry are now a lot closer to a final agreement. It’s worth noting that the chief federal mediator here, Scot Beckenbaugh, also negotiated an end to the months-long lockout by National Hockey League team owners this past weekend.

In ensuring continuation of cargo container royalties, the union appears to have the upper hand. Yet in the long-run, the ILA may be fighting a losing battle. Automated containerization has been a worldwide trend for decades. And this has made the shipping industry less labor-intensive. The number of dockworkers at the Port of New York and New Jersey, for example, has declined from about 35,000 to 3,500 during the last 50 years. Inflating labor costs would put U.S. shipping in a less competitive position than other nations. In Hong Kong, the world’s third-busiest container port in 2011, the loading and unloading of cargo at privately-owned terminals is at least as mechanized as here. By raising per-worker compensation costs along East Coast and Gulf Coast ports to often exorbitant levels, the International Longshoremen’s Association is doing right by its members – those who are left. But it’s also costing the rest of the nation.